Following some possibly deceitful actions by Duke Energy Corp. in the wake of its takeover of Progress Energy Inc., the attorney general’s office is investigating the events that led to the installation of a new CEO, just one day after the merger was finalized.
On July 2, 2012, Duke Energy Corp. and Progress Energy Inc. merged, in a deal that had been in the works since January 2011. The merger provided that Progress’ CEO, Bill Johnson, would remain in control of the two companies.
The companies were required to get state and federal approval to combine, which they did successfully. In addition, shareholders had to give their approval for the deal to go through. Shareholders were given an opportunity to vote for or against the deal. Reportedly, Progress’ board overwhelmingly recommended that its shareholders vote for the deal.
On July 3, 2012, Duke reported that James Rogers, the chairman and CEO of Duke before the merger, would take over as the CEO of the combined companies.
Following the announcement, Duke was placed on a negative credit watch by Standard and Poor’s, due to “the abrupt change in executive leadership.” If Duke’s credit is downgraded by S&P, North Carolina’s attorney general is worried that it might result in an increase in utility rates for North Carolina customers.
Many former members of Progress’ board expressed dissatisfaction with the sudden change, indicating they would not have voted for the merger if they have known Rogers would become the CEO. The decision to replace Johnson with Rogers was made by the new board, which includes 11 individuals from Duke and seven from Progress.
On Tuesday, Rogers, the new CEO, testified about the reasons for Johnson’s dismissal, stating concerns about his leadership style among other issues, according to The New York Times. Rogers contended that Duke fulfilled its contractual obligation to retain Johnson as CEO through the merger. He claimed, according to the New York Times, that the board had a fiduciary duty to let him go once they were no longer convinced of Johnson’s capacity to lead the company.
Duke Energy has over seven million customers in six states, making it the leading electric utility company in the United States.
Source: Bloomberg Businessweek, “North Carolina to Probe Duke Takeover of Progress Amid CEO Exit,” Mark Chediak and Benjamin Haas, July 7, 2012.